Senators were supposed to reach a deal on Sunday, but were unable to find common ground on the issue. As a result of their indecision Wall Street is beginning to feel the effects, with five consecutive days of sell-offs as investors get cold feet at the prospect of toppling over the ‘Fiscal Cliff.’

"There's still significant distance between the two sides, but negotiations continue," said majority leader Harry Reid to CNN as Congress held a rare Sunday session in a bid to avoid the so-called Fiscal Cliff. "There's still time left to reach an agreement, and we intend to continue negotiations."

The Democrats are pushing for a compromise that stipulates a raise in taxes and curbing government spending, while the Republicans have refused an increase in taxes.

The term Fiscal Cliff refers to a selection of tax cuts laid down by the Bush administration that will come to an end on January 1 along with an automatic increase in taxes and public spending. Economists have predicted that a tumble off the Fiscal Cliff could deal a massive blow to the American economy, sending it into recession. They also predict it will have a knock-on effect in the global economy.

If no deal can be reached before midnight tonight when the new measures are set to kick in, US President Barack Obama has said that he will “override” Congress into scaling down the changes.

Should talks on Monday fail to yield any palpable results, senators will have the chance to vote on a back-up plan proposed by Obama. The suggested plan would extend unemployment benefits and continue tax cuts on earnings below $250,000. He criticized the Republicans for prioritizing wealthy Americans with the economic policy.

"They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme," Obama said in a talk show appearance.

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‘Governing by crisis’

This is not the first time that economic changes have been bogged down in political wrangling by the senators. This year’s economic turmoil has its roots in a 2011 try at tackling the government debt limit and the US’ massive deficit. The Republicans and Democrats also failed to reach an agreement then, postponing the decision until the end of 2012.

Charlie McGrath, founder of Wide Awake News, told RT that the stalemate over the Fiscal Cliff was inevitable given that Congress was governed by private interests and not the interests of the American people.

“This is a prime example of what happens when you have collusion between financial special interests and your so-called representatives. They don’t represent the people, they are political prostitutes,” said McGrath. He said that the Washington “governs by crisis,” to serve the needs of private enterprise.

He stressed that “the hammer of austerity” would soon fall on America as a product of the financial crisis, but “no one in Washington is going to own up to austerity.”